So, you’ve found the dream vehicle. It probably took some research, a few test drives and now all you need is the relevant finance to make that purchase.
Although not quite as varied as vehicles themselves, auto loans come in many shapes and sizes according to the lender, the needs of the borrower and the vehicle in question. Such variables can lead to greatly different loan processes and structures – you may be tempted by a title loan, or a secured loan for a new or used vehicle, leasing possibly or if your current loan is proving a burden refinancing – all are options.
Last year, the average new auto loan reached a record $31,722.00 making it more important than ever for consumers to do their research.
Before you sign the first contract shoved under your nose, it is worthwhile considering; is that loan good for your current financial standing? Can you afford the monthly repayments and are you sure you are not in over your head?
To avoid such circumstances, it is important to know about the different auto loans offered on the market today.
There is a simple principle behind refinancing auto loans: to pay off the balance on your existing auto loan you take on a new loan.
Refinancing could be the key to finding better, more favourable terms if you’re struggling with high interest rates or an unaffordable monthly payment.
Through a refinanced auto loan, you may lower your monthly repayments by lengthening the term of your repayment, or it could help you save money through a lower interest rate.
For example: if your current auto loan is for $20,000 over 5 years with an APR of 7.5% you are paying $443.00 per month and costing you $4,194.00 in interest, if that rate was lowered to 6.7% you would lower your repayments to $418.00 a month. Giving you a saving of $25 a month and a total saving of $1,500 over the lifetime of the loan.
Loaning New/ Used Cars
Most standard loans are secured and unsecured (high interest rates) where a financier lends the customer the money to buy a new or used vehicle. It is the simplest of loans, but you need to be financially sound as the vehicle is used as collateral against the debt.
A lien is a legal agreement which makes this possible, the lender is listed as the lienholder on the vehicle’s title giving them right to possession of the vehicle until the loan is repaid.
Most financiers offer such loans from a low of $800 up to $50,000 over a term between 24 months to 84 months and with competitive low interest rates starting at 3.39%; why not check out our loan reviews here at bestautoloans.com.
If you don’t have the necessary finance to make that purchase, leasing a vehicle is a good alternative.
Here, the financier buys the car and then leases it to the client, offering the immediate use of the car with little or no capital outlay.
Such leases are available for both individuals and businesses where the client pays a fixed, monthly rental amount and is financially responsible for the maintenance and trade-in residual risk of the car.
Once the lease period finishes, the client has the option to refinance, return or buy the car for the residual amount.
Auto Loans with Bad Credit
If you have a bad credit record, it may feel like a daunting prospect when searching for an auto loan. However, help is at hand – there are several lenders on the market that specialize in offering borrowers with bad credit history, auto loans.
Generally, these finance options are provided by subprime lenders and they tend to have more flexible credit requirements and a higher tolerance for risk.
While borrowers with low credit scores may not be offered the most favorable interest rates, it is worthwhile using an online lending network which can help find a wider range of potential lenders to choose from.
So, remember it’s important to take time and do a little research when it comes to choosing the best auto loan for the vehicle of your dreams.